Rumor suggests that $9.99 price was more than most beta users were willing to pay

Networks
and movie rental firms see the writing on the wall; many consumers
are starting to demand streaming content rather than having to watch
via conventional TV or cable service. Netflix has a very robust
streaming service and the company now
considers itself a streaming firm that also mails DVDs.

Hulu
announced this summer that it would be bringing a subscription
service to users that would allow them to access more shows and
movies and watch that content on devices like web connected TVs, the
iPad, and the iPhone. When Hulu first talked the service up the price
for a membership was pegged at $9.99
per month. Hulu has been testing the service with some lucky
users for a few months now.

According
to AllThingsD sources
are now saying that Hulu is considering a significant
reduction in the price of its streaming service. That price
reduction rumor, if true, would seem to suggest that beta users are
not as interested in the service at nearly $10 per month as Hulu
expected. The sources cited by AllThingsD claim
that Hulu is looking at a new price of $4.95 per month.

If
that rumor turns out to be true, the price should make the service
much more appealing to users considering that for about the same $10
the subscription Hulu service was going to cost, Netflix users can
get streaming and DVDs in the mail.

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I feel like a lot of people are assuming $4.95/month would even come close to covering the advertising revenue. It would not, not even close. It would scare me to think how much TV watching would cost if it existed without advertising. You would end up paying for each channel like it was a premium movie channel (HBO, etc).

I am a HuluPlus user already (at $9.95), and the subscription allows me 720p on most primetime shows, almost all shows are viewable on the next day (regular hulu users often have a longer wait on some shows), and I can easily watch it off a PS3 in my Living Room. Also, I should soon be able to stream HuluPlus to my phone (Android support comes soon), Xbox360, or most Sony/Samsung TVs. Apple users are able to stream to iPhones, iTouches, and iPads.

The above is who this service is aimed at. If you are looking for commercial free, that is not what HuluPlus is about. HuluPlus is offered to cover additional services beyond those who will just be using a computer for viewing.

So you volunteer to pay $10 a month... ...to watch shows with the commercials... ...that are also broadcast in higher quality for free with commercials...

Given that hulu is getting major pushback from the few cable-based channels affiliated with them to not provide cable-channel content on hulu+, why bother paying money for access to broadcast only content?

I’d contemplate paying $5 a month (even with a *small* number of commercials) if I could get access to the cable based shows that I can’t get for free OTA, but I have no desire to pay just to get access to shows already free OTA.

I live in an apartment with roommates, and unless we pay for multiple DVR boxes, there is no way to record everything we watch (U-Verse would help, but not available). Between Primetime TV & sports networks, there is limited ability to record/watch shows. Hulu fills that niche, and allows me to play the primetime networks when I want, and on the go (on iTouch, soon EVO).

As I stated above, HuluPlus is not targeted at people looking for commercial free experiences. It is targeted at people who want to be able to access it from elsewhere then their primary TV setup, or who are limited by their current DVR abilities.

quote: As I stated above, HuluPlus is not targeted at people looking for commercial free experiences. It is targeted at people who want to be able to access it from elsewhere then their primary TV setup, or who are limited by their current DVR abilities.

There are other alternatives. Better DVR capabilities that will allow you to do all the things that you say are advantages with hulu+. All without the need to pay monthly.

In any case, if the "convenience" is worth it for you, or if you and your roommates just don’t know how to evaluate your other options. Knock yourself out.

quote: I feel like a lot of people are assuming $4.95/month would even come close to covering the advertising revenue. It would not, not even close. It would scare me to think how much TV watching would cost if it existed without advertising.

The U.S. has about 310 million people. If you figure 20% of them are too young to view TV or don't watch TV, that's 248 million viewers. $15 billion over 248 million viewers is $60/yr or $5/mo in advertising revenue per person. So $4.95/mo per person sounds about right for all the free OTA programming you want.

If you do it by household (figure each household shares the same Hulu account), the U.S. has about 115 million households. That works out to $130/yr per household, or $11/mo. Basically, the old and new service fee for Hulu pretty much exactly offsets their loss in advertising revenue.

This is partially true. That is a cause of the decline, but the primary cause has been the global recession. Companies simply do not have the advertising money they previously had, so their demand for air-time is less, causing a deflated price for the air time. As money is freed up for advertising, we will see the revenues increase again.

I do agree with your point though, if you made everyone who was TV-able pay for the service, at current rates it would cover television production, but it would be necessary to make everyone pay for it to work. I think the number of people who would be willing to pay would be much less then 80% of the population, so the cost would be higher.

And I would still end up paying on top of that for the channels that do not exist on OTA.

Ad revenue already pays for 1st run broadcasts and syndication for those shows that go that way. Adding a subscription fee to on-demand digital availability of reruns should be enough to cover server costs. Demanding both a subscription and forced ad viewing is just greedy on the part of content providers.